Company history

In the early 1950s domestic crude covered less than 3% of Japanese oil demand, and the foreign currency spent on imports kept climbing. Almost all Japanese oilfields belonged to Teikoku Oil, which produced over 97% of the domestic total and had itself been created in 1941, half state-funded, to consolidate the country’s oil operations. Output had collapsed to a postwar low in 1948 and only partly recovered. The government answered with a five-year comprehensive petroleum development plan targeting a million kilolitres a year — nearly three times the 1951 result — and in December 1955 established Japan Petroleum Exploration as the special company to execute it, with the state holding about 56%. The logic was explicit: Japanese fields were too small to sustain exploration as a commercial business, so the money had to come from policy rather than from returns.

Discoveries arrived by the third year — the Mitsuke field in Niigata and Sarukawa in Akita in 1958, Higashi-Niigata gas field in 1959, Katakai in 1960, Yoshii in 1968 — across four regions from Hokkaido to Niigata, with geophysical survey and drilling technology built up as businesses in their own right. Overseas exposure began in 1966 with participation in North Sumatra offshore development, the seed of a holding that later led to INPEX.

Then in October 1967 the government created the Japan Petroleum Development Corporation and dissolved the company into it, twelve years after founding. The corporation did not explore itself; it invested in, lent to and guaranteed private explorers, with loans repayable only on success. In April 1970 the domestic development business was separated out again as a private company under the old name — but since the corporation had inherited the state’s shares, the government remained the majority owner through it. Two changes of legal form in three years; and presidents continued to come, as they had from the start, from the Ministry of International Trade and Industry.

As a private company again, JAPEX built out functional subsidiaries — offshore development in 1971, engineering the same year, a geoscience institute in 1983 — and pushed exploration north, finding Yurihara in Akita in 1976 and the Yufutsu oil and gas field in Hokkaido in 1989. But the resource itself set the limit: conventional fields along the Japan Sea coast and in Hokkaido, discovered steadily, never changed the scale of production. The oil shocks made the further point that even self-developed crude was governed by the producing countries’ intentions.

The structure of Japanese oil development around it was peculiar. Each project got its own company — the “one project, one company” method, described as a compromise between the Finance and Trade ministries over whether money lent for wells that succeed three times in a thousand must be repaid. The public corporation invested in and guaranteed roughly seventy such development companies and swelled its own liabilities in the process. No Japanese firm ever became an integrated international oil company; JAPEX, known as the eldest son among the corporation’s offspring, made its living from high-margin domestic natural gas.

The decisive move was downstream. In March 1996 the company completed the Niigata–Sendai gas pipeline, 251 km carrying gas from its Niigata fields to city gas utilities and large users across Tohoku; a second line took Yufutsu gas to Tomakomai and Sapporo. The business stopped being discovery and production alone and became transport and sale as well — a hedge against price swings, and an entry into infrastructure that demands a balance sheet. It remained small: ¥89.7 billion of consolidated sales and ¥10.0 billion of recurring profit in the year to March 2002, after four decades of exploration — though the margin on domestic gas was high enough to promise 15% at the time of listing.

The Koizumi-era dismantling of public corporations set the petroleum corporation’s abolition for March 2005 and required its assets — including JAPEX shares — to be sold. The Agency for Natural Resources and Energy had sketched a merger of four companies; JAPEX did not want to be reorganised alongside the debts of Japan Oil Development, which filed for rehabilitation with ¥307.7 billion of liabilities in March 2003. It had been preparing to list since 2000 and argued its case on the funding needs of Sakhalin-1. On 10 December 2003 it reached the first section of the Tokyo Stock Exchange through a sale of the corporation’s shares — no new equity, about ¥30 billion to the corporation, and the state’s holding down from 65.74% to 49.94%.

The corporation was abolished in April 2005 and its shares passed to the Minister of Economy, Trade and Industry; a further sale in 2007 cut the government to 34.00%. When INPEX and Teikoku Oil combined in 2005 and were designated the national flagship for upstream oil, the industry expected JAPEX to follow. President Tanahashi Yuji refused outright: there may be more than one core upstream company, he said, and joining them was out of the question.

What the listing actually bought was credit, and the credit went overseas. Stakes in an Indonesian block in 2007, subsidiaries for the Garraf field in Iraq in 2010 and the UK North Sea in 2014. Consolidated sales grew from ¥96.7 billion in the year to March 2004 to ¥304.9 billion by March 2015, and recurring profit from ¥14.5 billion to ¥54.8 billion — roughly triple in eleven years. Yet by segment in the year to March 2014, Japan supplied ¥261.5 billion of sales against ¥14.7 billion in North America and ¥0.4 billion in the Middle East: the domestic gas business was still earning almost everything.

The oil price collapse exposed how violently conventional production swings. Sales fell from ¥304.9 billion in the year to March 2015 to ¥207.1 billion two years later, and recurring profit from ¥54.8 billion to ¥2.2 billion — a twenty-fifth — with headcount essentially unchanged. Impairments followed: ¥67.7 billion inside ¥78.2 billion of extraordinary losses in the year to March 2018, giving a ¥31.0 billion net loss; another ¥31.0 billion net loss in the year to March 2022, when ¥145.8 billion of extraordinary losses outweighed ¥83.6 billion of gains. Downstream assets kept accumulating regardless — the Soma LNG terminal started up in 2018 and Fukushima Gas Power began selling electricity in 2020, completing a chain from exploration to generation twenty-two years after the pipeline.

By March 2023 consolidated cash had reached $1.5B (¥192bn), of which roughly ¥100 billion was surplus to project and working needs. Asked at the May 2023 briefing about the cash pile and a share price below book value, management said there was no quick fix and acknowledged the market’s view that oil and gas offered little growth in a decarbonising world.

In April 2024 Yamashita Michio became president — the first career employee to hold the job since 1955, a finance man who joined in 1982 and worked on the 2003 listing, with his predecessor staying as chairman and the government still holding about 38%. He made building core overseas E&P assets the first priority, noting that North American operating profit of ¥19.7 billion would roughly halve by 2025 on existing assets alone, and moved to acquire. The year to March 2025 produced ¥389.1 billion of sales and ¥81.2 billion of net profit; a Norwegian subsidiary was added in July 2024. In May 2025 the minimum annual dividend was raised from ¥10 to ¥40 a share, sized so that a 30% payout would hold even on conservative price assumptions. The 2026–2035 plan targets 100,000 boe/d and ¥40 billion of after-tax business profit by fiscal 2031, backed by $7.0B (¥1.1tn) of cumulative overseas E&P investment — ¥600 billion of it in the United States — from a starting point of about ¥20 billion. The government’s roughly 38% stake is to remain.